I've been experiencing the same issue too, so I was wondering if anyone had found a solution yet?
I've been using Lakka instead of RetroPie, and I have a 60w usb power supply but other than that my setup is identical to a 8" Picade. I had no problems at all with the default analogue RPI audio output, other than the normal hissing and poor quality state of it, no matter how loud I turned up the Picade PCB volume.
I bought and connected a Phat-DAC to improve the sound quality - which it has - but now I'm getting the same automatic volume decrease that is reported here. I turn it back up and the Picade PCB turns it self back down after a few seconds. Oddly, it happens a lot more frequently, on certain emulator cores, mostly the SNES, and NES and MAME ones, but not on PSX or PC-engine. So far I've tried a few things...
First, I plugged in a USB power splitter cable to power the Picade PCB from the 60W USB power supply (a six port Anker one). That didn't improve the issue at all.
Next, I tried turning down the volume on the Picade PCB, to try and limit the current draw the amp was pulling, this also made no difference either.
What did make a difference was dropping the output volume from inside the emulator itself (using Lakka's internal audio config). With the output volume from the Phat DAC reduced, I can turn the Picade volume right up and not get a problem... most of the time, unless there's a really big loud bang from an explosion, and turning the internal volume down further continues to mitigate the issue. I've tried this both with and without the USB splitter cable powering the Picade PCB, and it seems to make no difference at all.
So I can't be 100% sure in any way but I'm wondering if the Picade PCB has some kind of input protection/volume throttling built into it, and it's simply a case of the Phat DAC being too loud/distorted/clipping? Is this likely, and does anyone have the time to check/try this out to see if it works for them too?
Cheers in advance for your help! :)